FEBRUARY 14, 2000 VOLUME 7, NUMBER 33
Premarital agreements are increasingly common, particularly in second marriages and between older couples. Do agreements between couples really work? A recent Arizona case provides good evidence that premarital agreements really can protect both husband and wife.
Christopher and Shelley Schlaefer were married in 1994. They had already signed an agreement before the wedding. Like most premarital agreements, the Schlaefers’ provided that neither would have any claim against the other’s separate property, and that neither would be liable for the other’s debts.
While they were married, Shelley Schlaefer became ill and was treated at Paradise Valley Hospital in the Phoenix area. Christopher Schlaefer did not sign his wife’s admission documents, and never agreed to pay her hospital bill.
Sometime later, the Schlaefers divorced. After the divorce was final, Paradise Valley Hospital sought to collect the hospital bill from Mr. Schlaefer.
Arizona, of course, is a community property state. That usually means that each spouse receives an ownership interest in the other spouse’s earnings, and that each spouse is liable for the other spouse’s debts in most situations. Mr. Schlaefer, however, pointed to the prenuptial agreement and insisted that he was not responsible for his wife’s hospital debt.
Paradise Valley Hospital acknowledged that the Schlaefers could agree between themselves about how to divide their debts. But, the hospital argued, they could not bind their creditors to abide by their agreement. To allow the Schlaefers (or any couple) to change the general rules governing community property would be unconscionable, argued the hospital.
The Arizona trial court agreed, and ordered Mr. Schlaefer to pay not only his wife’s hospital bill but also the attorneys’ fees incurred by Paradise Valley Hospital in collecting the debt. Mr. Schlaefer appealed.
The Arizona Court of Appeals reversed the trial judge’s decision. The appellate court pointed out that the premarital agreement changed the nature of the couple’s debts—they no longer were presumed to be community debts but had been "transmuted" into separate debts. Furthermore, the award of attorneys’ fees was reversed, and Paradise Valley Hospital was directed to pay Mr. Schlaefer’s attorney’s fees for the appeal. Schlaefer v. Financial Management, January 27, 2000.
Do prenuptial agreements work in Arizona? Yes, they do—not only to protect spouses from one another in the event of subsequent divorce but also to protect both husband and wife from creditor’s claims against the other spouse.